Chapter 2 - Becker

Question 1

Legal Cost for Patents
1 - Successful
2 - Unsuccessful

Answer 1

1 - capitalize ALL associated costs

2 - expense ALL associated costs

Question 2

R&D 
1 -  marketing research
2 - technological feasibility
3 - economic life or useful life
4 - other manufacturers
5 - internally used items
6 - follow up
7 - troubleshooting
8 - Quality Control

Answer 2

1 - not R&D
2 - expense before; capitalize after
3 - lesser of 
4 - expense
5 - not R&D; internally developed for sale R&D
6 - not R&D
7 - not R&D
8 - not R&D

Question 3

Interest
1 - Compounded Annually
2 - Simple Interest

Answer 3

1 - Amt * % = Interest for YR !
(Amt+ interest for YR2) *% = Interest for YR2
2 - Amount OWED * %

Question 4

KEY Point
1 - Prepaid Insurance exsisted and a new policy has been taken
2 - Project fees are incurred

Answer 4

1 - reverse old prepaid

2 - upon completion

Question 5

Goodwill

Answer 5

The excess of the FV over the acquisition price of another entity; therefore no capitalization permitted

Question 6

1 - Sales Revenue Formula

2 - Sales Tax Collected

Answer 6

1 - Sales Revenue/ Sales Tax Rate +1 = Actual Sales Revenue

2 - Actual Sales Revenue * Sales Tax Rate

Question 7

GAAP Impairment
1 - Step 1; Step 2
2 - Subsequent Reversal of impairment exception
3 - indefinite CF

Answer 7

Step 1 FV > FCF
Step 2: CV- FV = Impairment
2 - asset is held for sale

Question 8

IFRS Impairment

1 step

Answer 8

Recoverable amount( greater if value in use or FV of cost to sell) - CV

Question 9

Cash equivalent does not require

Answer 9

1 - does not require interest

Question 10

COGS formula

Answer 10

+ Purchases
+ beg inventory
- Ending Inventory
= COGS

Question 11

Selling Expenses (2)

Answer 11

1 - freight out

2 - sales related salaries

Question 12

Increase to cash surrender value of insurance policy offsets

2 - Dividends treatment

Answer 12

policy expense

2 - automatically added to increase in cash surrender value

Question 13

Interest Expense
1 - Short term
2 - Long term

Answer 13

1 - expensed as incurred

2 - capitalized and expensed at a later time

Question 14

Interest Swap risks

Answer 14

1 -counter party compliance

2 - non profitable exchange rate

Question 15

Payroll Tax
1 - Expense
2 - Liability

Answer 15

1 - Employer portion owed

2 - Employer + Employee Expense

Question 16

Annual Amortization is the greater of

Answer 16

1 - Rate of current gross revenue

2 - S/L method depreciation